IAG Third-Quarter Operating Profit Falls 16% on Higher Fuel Costs

International Airlines Group (IAG)—the parent company of British Airways, Iberia, Vueling, and Aer Lingus—reported an operating profit before exceptional items of €1.73 billion (€1,726 million) for the third quarter ended 30 September 2026. The operating result represented a 15.9% decline compared with €2.05 billion recorded during the third quarter of 2025, falling slightly short of analyst forecasts as escalating aviation fuel prices and regional operational disruptions pressured industry margins. Despite these cost headwinds, group quarterly revenue climbed 4.5% year-on-year to €9.74 billion, underpinned by sustained passenger volume and robust transatlantic premium yields.

Robust Transatlantic Demand and Revenue Expansion

Strong consumer appetite across both leisure and corporate segments drove top-line growth across IAG's primary networks during the peak European summer travel period. Long-haul yields exhibited notable resilience, particularly on North Atlantic corridors operated by British Airways and Aer Lingus, as well as Latin American routes anchored by Iberia's Madrid hub.

Group capacity, measured in available seat kilometres (ASK), contracted marginally by 0.2% during the quarter compared with the prior year. The slight capacity adjustment reflected tactical schedule trims prompted by geopolitical tensions in the Middle East and ongoing European air traffic control bottlenecks, which constrained aircraft utilisation and added unexpected positioning expenses.

Geopolitical Spikes Elevate Jet Fuel Expenses

Surging fuel expenses served as the primary headwind to profitability across European network carriers in late 2026. IAG's net fuel unit costs jumped 30.7% during the three-month period, adding approximately €565 million in additional commodity outlays compared with the same quarter in 2025. Heightened regional instability in the Middle East drove crude benchmark volatility and widened jet fuel refining crack spreads globally.

Non-fuel unit costs also experienced upward pressure, rising 3.4% year-on-year. Management attributed this increase to widespread air traffic management restrictions across Central and Southern Europe, supplier supply-chain delays affecting spare engine turnaround times, and negotiated collective labour agreements across frontline engineering and flight operations teams.

Operating Performance Across Group Airlines

Operating contributions varied across the group's individual airline operating companies:

• British Airways delivered revenue of £4.21 billion, up 4.5% year-on-year, but operating profit decreased by £205 million to £608 million, yielding an operating margin of 14.4%.
• Iberia generated revenue of €2.30 billion, representing a 6.9% increase, with operating profit settling at €452 million compared with €510 million in the prior-year period.
• Vueling posted stable revenue of €1.08 billion, generating €257 million in operating profit and maintaining the group's highest quarterly operating margin at 23.8%.
• Aer Lingus recorded revenue of €815 million and an operating profit of €142 million, absorbing the financial impact of earlier summer industrial disputes.
• IAG Loyalty continued its rapid growth trajectory, expanding quarterly operating profit by 8% to £152 million with a robust 18.9% margin.

Balance Sheet Resilience and Shareholder Returns

Despite escalating operating expenses, IAG closed the quarter with strong financial liquidity and credit metrics. Net debt to EBITDA leverage stood at a conservative 0.6x as of 30 September 2026, supported by healthy cash generation from advance passenger bookings extending into the first half of 2027.

Reflecting balance sheet confidence, the board of directors approved a 10% increase in the interim dividend to €0.053 per share and confirmed the continuation of its €1.5 billion multi-year share buyback programme. Looking ahead to the full fiscal year, IAG reaffirmed its forecast of achieving an operating margin before exceptional items of at least 12%, while projecting total 2026 group capacity to remain roughly flat to slightly down compared with initial targets.